Department of Labor Proposal – Make Overtime Exemptions More Expensive

Kegler Brown E-mployment Alert

The U.S. Department of Labor announced a proposed rule – which has been anticipated for 15 months – that will change the regulations that govern who will be considered exempt from overtime pay.

The Department focused in the proposed rule on only the minimum salary levels that are required for an employee to be considered exempt. Specifically, the proposed rule:

  • Increases the minimum salary requirement for “white collar” workers (executive, administrative and professional employees) from the current level of $455/week to a salary equal to the 40th percentile of full-time salaried workers (presumably based on Bureau of Labor Statistics data). This would result in a projected $921/week salary requirement, or $50,440 per year.
  • Raises the total annual compensation requirement for exempt “highly compensated employees” to the 90th percentile of weekly earnings for full-time salaried workers, which is projected to be $122,148 per year.

The Department believes that this proposal will result in an additional 5 million workers becoming eligible for overtime pay in its first year of implementation.

The only specific proposals in the notice concerned the base salary levels for the exemptions. However, the Department also sought public comment on whether the current “duties” tests for the exemptions should also be modified.

The next step is that the proposed rule will be published in the Federal Register, after which there will be a 60-day comment period before the final rule will be published.

We will be studying the rule through its final form, as well as the projected effects of the changes for our clients and alternative means of compliance. We plan to hold a breakfast briefing before the final rule goes into effect, during which we will explain the final requirements and suggestions for implementation of the new rule.